MC: Rates And Returns Pt.2

Question 1

Give order of the four returns from largest to smallest.

Answer 1

Gross return—-> Net Return—->After tax return ——-> Real Return

Question 2

Which comes first in adjustments? Taxes or Inflation adjustment?

Answer 2

Taxes is before inflation adjustments.

Question 3

Give equation for leveraged return.

Answer 3

(Port return x Asset value) - (value borrowed x cost of borrowing) / Own equity

Question 4

To compound/discount at continuously compounded rates you do what

Answer 4

You multiply/divide by e^stated rate

Question 5

Continuously compounded rates are ______ over multiple periods.

Answer 5

Additive

Question 6

Equation for actual holding period return of stated rates being continuously compounded.

Answer 6

= e^stated rate - 1

Question 7

Equation to convert actual holding period return to stated continuously compounded rate.

Answer 7

= LN ( 1 + HPR)

Question 8

What is the exponential constant?

Answer 8

= 2.71827